Page 124 - HBR's 10 Must Reads on Strategic Marketing

THE FEMALE ECONOMY

salesperson based his value proposition on the service that he,
personally, would provide.
Unbeknownst to the salesperson, the customer had built a cus-
tomer value model, which found that the company’s offering,
though 10 cents higher in price per IC, was actually worth 15.9 cents
more. The electronics engineer who was leading the development
project had recommended that the purchasing manager buy those
ICs, even at the higher price. The service was, indeed, worth some-
thing in the model—but just 0.2 cents! Unfortunately, the salesper-
son had overlooked the two elements of his company’s IC offering
that were most valuable to the customer, evidently unaware how
much they were worth to that customer and, objectively, how supe-
rior they made his company’s offering to that of the competitor. Not
surprisingly, when push came to shove, perhaps suspecting that his
service was not worth the difference in price, the salesperson of-
fered a 10-cent price concession to win the business—consequently
leaving at least a half million dollars on the table.
Some managers view the customer value proposition as a form of
spin their marketing departments develop for advertising and pro-
motional copy. This shortsighted view neglects the very real contri-
bution of value propositions to superior business performance.
Properly constructed, they force companies to rigorously focus on
what their offerings are really worth to their customers. Once com-
panies become disciplined about understanding customers, they
can make smarter choices about where to allocate scarce company
resources in developing new offerings.
We conducted management-practice research over the past two
years in Europe and the United States to understand what consti-
tutes a customer value proposition and what makes one persuasive
to customers. One striking discovery is that it is exceptionally diffi-
cult to find examples of value propositions that resonate with cus-
tomers. Here, drawing on the best practices of a handful of suppliers
in business markets, we present a systematic approach for develop-
ing value propositions that are meaningful to target customers and
that focus suppliers’ efforts on creating superior value.

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